Cement boss says continent needs concrete plans to house millions
Thanks to the slowdown in South Africa's construction sector since the boom leading to the 2010 Soccer World Cup, local companies are looking elsewhere in Africa for opportunities."Africa's biggest challenge is that we've got to build cities three times the size of the American population in the next 35 years," said Kevin Odendaal, PPC's business development executive, speaking at a construction conference this week.His presentation highlighted the opportunities for construction sector growth that exist in Africa due to population growth expected in the next 35 years.According to the Mo Ibrahim African Urban Dynamics report, Africa will need to accommodate about 900million new urban dwellers by 2050, when it is forecast that Africa will make up one quarter of the global population. The current population in Africa is 1.2billion, with about 40% living in cities.This means Africa needs to build infrastructure to accommodate this growth.For PPC, population growth and urbanisation present opportunities.Currently, the average cement consumption per capita in Africa is 175kg per person against a world average of 500kg."This indicates that there isn't enough construction happening in Africa," says Odendaal. To put it into perspective, at its peak, cement demand in China reached about 1,300kg per person with a population of almost 1.4billion.Given the population growth forecast for Africa, Odendaal says cement manufacturers should anticipate supplying cement equivalent to 1000kg per person in the next 35 years because Africa will have to accommodate the equivalent of another China.PPC, in a bid to gain market share on the continent, has a one-million-ton cement plant under construction in the Democratic Republic of the Congo, a million-ton plant under construction in Bulawayo in Zimbabwe, with a small but growing manufacturing presence in Harare.It has also invested in a 1.4-million-ton plant in Ethiopia, which is due to be commissioned halfway through 2017.In Rwanda, PPC has invested $165-million (about R2.4-billion) in a plant, roads, schools and a clinic. Its investment has turned Rwanda from a net importer of cement to a net exporter.This is in line with PPC's plans to grow revenue 40%.Odendaal warns against neglecting the full effect of urbanisation and focusing on megastructures. "Investment tends to be skewed towards transport, energy and the power sector, but Africa is also in desperate need of housing, sanitation and water."Doing business in Africa is not without it s challenges for companies such as PPC and those looking for investment opportunities, such as Stanlib's Infrastructure Private Equity Fund, headed by Greg Babaya.A major problem that construction companies run into in terms of long-term infrastructure projects is that the span of the project is not aligned with political cycles, which adds an element of uncertainty.Odendaal says one way to avoid this is for the private sector to work with governments to get an understanding of "the security of the investment in terms of government policy" and what motivates these policies. The private sector should then work to ensure that policy takes the time span of infrastructural projects into consideration.Babaya says that inefficiencies in the public sector are another obstacle and often deter investors. "It's rare to come across an efficient procurement process where people know what they want, can package it quickly, process and get it out the way and it's competitive and you're able to make decisions."The present value cost of spending three to four years just to know whether you got a deal or not kills all your strategic planning and the company. When people can't see what's coming, they walk away and look for opportunity in other parts of the world."..